Tags: jeb hensarling | housing | crisis | financial | institutions | fannie mae | freddie mac

Jeb Hensarling: Administration Bringing Back Housing Crisis Errors

By    |   Tuesday, 27 Jan 2015 09:14 PM

The chairman of the House panel charged with oversight of U.S. financial institutions warned the Obama Administration Tuesday that it is making a big mistake by attempting to promote home ownership through the mortgage giants Fannie Mae and Freddie Mac, recipients of government bailouts during the 2008 financial crisis, the Washington Examiner reports.

"You're once again putting people into homes that they can't afford to keep," House Financial Services Committee Chairman Jeb Hensarling told Federal Housing Finance Agency (FHFA) Director Mel Watt, whose agency oversees Fannie and Freddie.

"Contrary to the fable told by the left, the root cause of the financial crisis was not deregulation but dumb regulation," the Texas Republican said, the Examiner reports.

Much of the problem in 2008, he added, stemmed from regulations and statutes that encouraged or required financial institutions "to loan money to buy homes they ultimately could not afford."

The Examiner reports Hensarling asked Watt, whose agency oversees Fannie and Freddie, to explain three decisions in particular: last month's move to have the agencies contribute to "affordable housing" trust funds which Republicans regard as nothing more than political slush funds; delaying an increase in the fees Fannie and Freddie pay for government-backed insurance; and backing loans with down payments as low as 3 percent of the value of the mortgage.

Pointing to studies showing a link between low down payments and increased likelihood of mortgage delinquencies and defaults, Hensarling said the administration was repeating mistakes that helped bring about the crisis of 2008.

"Memories are clearly short among Washington’s ruling class because they are repeating the same mistakes that caused the 2008 financial crisis in the first place,” said Hensarling, the Examiner reports.

Watt claimed that a three percent down payment can be as safe for the taxpayers as one with a 10 percent down payment "when you pair the down payment with other compensating factors."

These include requiring borrowers to obtain private mortgage insurance, obtain loan counseling, or have higher credit scores.

Watt himself admitted that while delinquencies have declined, they "remain historically high compared to pre-crisis levels," the Examiner reports.

After watching testimony by Watt, who served in the House for 21 years before President Obama appointed him head of the FHFA, the Wall Street Journal's Mary Kissel wrote that the administration's approach could trigger another housing crisis.

"The sad irony of the 2008 housing crisis is that it most hurt the low-income, largely minority populations that Democrats say they want to help." Republicans, she said, should join Hensarling in pushing for "more free-market competition and less politically motivated lending."

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The chairman of the House panel charged with oversight of U.S. financial institutions warned the Obama Administration Tuesday that it is making a big mistake by attempting to promote home ownership...
jeb hensarling, housing, crisis, financial, institutions, fannie mae, freddie mac, obama, administration
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2015-14-27
Tuesday, 27 Jan 2015 09:14 PM
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